Schwab Wins Suits Against Brokers in Texas, Nebraska, Dismisses Another Claim
(Updates with comment from Fidelity in 11th paragraph.)
Charles Schwab has scored legal victories against former brokers who it claims solicited business from clients in violation of their employment contracts, but it and rival Fidelity Investments also dismissed cases last week against two other breakaway advisors.
In separate stipulated settlements last week, brokers John VanEngelenhoven and David Spiess agreed to stop soliciting former clients until February 2020 and March 2021, respectively. Schwab had sued them in August.
The agreements, approved by judges, also require the former brokers to return any record or information pertaining to Schwab’s clients or business, even if such information was recreated from their memories, according to the September 12 filings.
VanEngelenhoven left Schwab last September after 14 years to form a registered investment advisor practice in Austin, Tex., but was not sued by Schwab until August 20, 2019. Spiess, who is based in Omaha, Neb., resigned last month, after 22 years with Schwab, with plans to start his own investment firm, according to Schwab’s August 23 complaint.
The brokers accepted the solicitation freezes but denied liability or wrongdoing, according to the stipulated agreements. Schwab will continue to press Finra arbitration claims against the brokers, according to Peter Greenley, managing director of corporate reputation at Schwab.
Neither of the brokers responded to requests for comment. Cynthia R. Levin Moulton, a lawyer for VanEngelenhoven, said Schwab has not asked for damages in its Finra arbitration complaint. A lawyer for Spiess declined to comment.
In another decision last week, Schwab backed off its request for a preliminary injunction it filed in mid-August against Andy Saeger, a Wisconsin broker who joined BMO Harris Financial Advisors in 2018 after 12 years with Schwab. The suit was dismissed without prejudice, meaning Schwab can refile against Saeger.
The Schwab spokesman declined to comment on the firm’s intentions or why it agreed to a dismissal. Saeger did not return a request for comment.
Schwab and Fidelity Investments have been actively pursuing brokers who leave for other firms, claiming their client relationships were developed by the discount brokerage firms rather than through their own sales initiatives. In July, Schwab sued Alfredo J. Martinez, a New Orleans broker who set up an independent practice after working for a decade at the firm. The case is pending.
Fidelity, however, also backed off one of its lawsuits last week. The broker-dealer unit of the Boston-based investment giant agreed to permanently dismiss (“with prejudice”) a non-solicitation injunction request it filed a year ago against Laurence Rollins, a Westport, Connecticut, broker who had worked at the firm for 14 years before leaving in July 2018.
Sophie Launay, a Fidelity spokeswoman, said the firm was “pleased with the outcome” but declined to comment on terms of the agreement. “The firm has and will continue to take necessary steps to protect our customers’ information,” she wrote in an e-mail.
Fidelity alleged in its complaint that Rollins reached out to a former customer on the day he resigned, looked up information a day earlier on a $65 million account of a customer he did not service and also initiated LinkedIn connections with eight other customers.
Louis M. Lagalante, a lawyer for Rollins, declined to comment on the settlement, citing confidentiality.
